Indian Overseas Bank, CHENNAI V. DCIT LTU-2, CHENNAI

ITA 776/CHNY/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 2829 (ITAT-CHENNAI)
• Duration Of Justice: 11 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2013-2014
• Appeal Filed On: 05-03-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M SRINIVASA RAO
• Keywords: General deduction; Depreciation; Double taxation relief; Earning of tax free income; Permanent establishment; Bad and doubtful debts; Assessment record
• Section: 43B; 14A; 115JB; 90

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , D B ENCH, CHENNAI . . . , , ' BEFORE SHRI N.R.S.GANESAN, JUDICIAL MEMBER AND SHRI S.JAYARAMAN, ACCOUNTANT MEMBER / I.T.A. NO.776/CHNY/2018 '' /ASSESSMENT YEAR : 2013-14 INDIAN OVERSEAS BANK, 763, ANNA SALAI, CHENNAI-600 002. VS THE DEPUTY COMMISSIONER OF INCOME-TAX, LARGE TAX PAYER UNIT-2, CHENNAI-600 034. PAN: AAACI1223J ( /APPELLANT) ( /RESPONDENT) & / I.T.A. NO.947/CHNY/2018 '' /ASSESSMENT YEAR : 2013-14 THE ASSISTANT COMMISSIONER OF INCOME-TAX, LARGE TAX PAYER UNIT-2, CHENNAI-600 034. VS INDIAN OVERSEAS BANK, 763, ANNA SALAI, CHENNAI-600 002. PAN: AAACI1223J ( /APPELLANT) ( /RESPONDENT) ASSESSEEBY : MR. C. NARESH, C.A REVENUE BY : MR. M. SRINIVASARAO, CIT /DATE OF HEARING : 22.01.2019 /DATE OF PRONOUNCEMENT : 28.02.2019 / O R D E R PER S.JAYARAMAN, AM: THEASSESSEE AS WELL AS THE REVENUE FILED THESEAPPEA LS AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-5 , CHENNAI, IN ITA NO. 102/CIT(A)-5/16-17 DATED 29.12.2017 FOR ASSESSM ENT YEAR 2013-14. 2 ITANOS.776 & 947/CHNY/2018 2. M/S.INDIAN OVERSEAS BANK, THE ASSESSEE, IS A SCH EDULED BANK AND IS ASSESSED AS A COMPANY FOR THE PURPOSE OF INCOME TAX. WHILE MAKING THE ASSESSMENT FOR THE ASSESSMENT YEAR 2013-14, THE ASSESSING OFFICER, INTER-ALIA, MADE DISALLOWANCE UNDER SECTION 36(1)(V IIA), RESTRICTED PROVISION MADE UNDER SECTION 36(1)(VIIA),MADE DISAL LOWANCE IN RESPECT OF BAD DEBTS WRITTEN OFF RELATING TO NON-RURAL BRAN CHES ON SUBSTANTIVE BASIS, MADE DISALLOWANCE UNDER SECTION 14A READ WIT H RULE 8D, RESTRICTED RELIEF UNDER SECTION 90 TO THE EXTENT OF TAX PAID IN FOREIGN COUNTRY INSTEAD OF TAX CHARGED ON FOREIGN INCOME WHICH WAS INCLUDED IN TOTAL INCOME, DISALLOWED DEPRECIATION ON GOODWILL, DISALLOWED CON TRIBUTION TO STAFF WELFARE FUND, MADE DISALLOWANCE OF BAD DEBTS RECOVE RY DURING THE YEAR BROUGHT TO TAX AS OFFERED IN PROFIT & LOSS ACCOUNT AS CLAIMED BY THE ASSESSEE IN INCOME-TAX COMPUTATION, RESTRICTED DEP RECIATION CLAIMED ON UPS FROM 80% TO 60%, DISALLOWED DEPRECIATION CLAIM ED ON ATMS ETC. AGGRIEVED, THE ASSESSEE FILED APPEAL BEFORE LD. CI T(A), WHO PARTLY ALLOWED THE APPEAL. AGGRIEVED AGAINST THE ORDER O F THE LD. CIT(A), THE ASSESSEE FILED THE APPEAL WITH THE FOLLOWING GROUN DS:- DEDUCTION U/S 36(1)(VIIA) 1.1 THE LD.CIT(A) ERRED IN CONFIRMING ORDER OF AO T HAT RESTRICTED DEDUCTION U/S 36(1 )(VIIA) IN RESPECT OF PROVISION MADE IN BOOKS FOR BAD AND DOUBTFUL BY ADOPTING METHODS CONTRARY TO WH AT IS PRESCRIBED IN THE ACT. 3 ITANOS.776 & 947/CHNY/2018 1.2 THAT CIT(A) RESTRICTED DEDUCTION FOR BAD AND DO UBTFUL DEBTS ONLY TOWARDS RURAL ADVANCES WHEREAS SAID SECTION ALLOWS DEDUCTION IN RESPECT ALL BAD AND DOUBTFUL ADVANCES RURAL OR OTHE RWISE. 1.3 THAT CIT(A) OMITTED TO CONSIDER PROVISION MADE IN RESPECT OF DEBTS THOUGH CLASSIFIED AS STANDARD ASSETS THAT HAD ARREARS UP TO 90 DAYS FOR THE PURPOSE OF COMPUTATION OF DEDUCTION U/ S 36(1 )(VIIA). 1.4 THAT CIT(A) OMITTED TO CONSIDER PROVISION MADE UNDER COUNTRY RISK AS PER RBI GUIDELINES FOR THE PURPOSE OF COMP UTATION OF DEDUCTION U/S 36(1 )(VIIA). DEDUCTION U/S 36(1)(VII) AS ALTERNATE CLAIM: 2.1 WITHOUT PREJUDICE TO THE ABOVE, CIT(A) OUGHT NO T TO HAVE DISMISSED THE ALTERNATE PLEA OF APPELLANT THAT IF C LAIM OF DEDUCTION U/S 36(1 )(VIIA) FOR PROVISION MADE WAS NOT ALLOWED THE N AS A COROLLARY DEDUCTION ON AMOUNT WRITTEN OFF BASED ON APEX COURT DECISION IN THE CASE OF VIJAYA BANK (323 ITR 166) SHOULD HAVE BEEN ALLOWED. THE CIT(A) OUGHT TO HAVE APPRECIATED THE ALTERNATE PLEA THAT PROVISION FOR NON PERFORMING ASSETS(NPA) TANTAMOUNT TO PROVISION FOR BAD AND DOUBTFUL DEBT, BASED ON THE JURISDICTIO NAL ITAT DECISION IN TAMILNADU STATE APEX CO-OPERATIVE BANK LTD VS DC IT(2014) 43 TAXMANN.COM 111(CHEN) AND THEREFORE REJECTION OF AL TERNATE PLEA IS UNREASONABLE AND CONTRARY TO THE PROVISIONS OF THE ACT. PROTECTIVE DISALLOWANCE U/S 36(1 )(VII) 3.1 THE ID CIT(A) FAILED TO APPRECIATE THAT DISALLO WANCE MADE BY AO IN RESPECT OF CLAIM U/S36(1) (VII) WAS ONLY ON A PR OTECTIVE BASIS, THE AO SHOULD NOT HAVE TREATED SAME AS A PART OF SUBSTA NTIVE ASSESSED INCOME AND HENCE HE OUGHT TO HAVE DIRECTED THE AO N OT TO INCLUDE THE SAME AS PART OF ASSESSED INCOME. TAX RELIEF U/S 90: 4.1 THE LD CIT (A) ERRED IN RESTRICTING THE RELIEF U/S 90 ONLY TO THE EXTENT OF TAX PAID IN THE FOREIGN COUNTRY WHEREAS T HE CORRECT RELIEF TO BE ALLOWED IS TAX CHARGED ON THE FOREIGN INCOME WHI CH IS INCLUDED IN TOTAL INCOME. DEPRECIATION ON GOODWILL 5.1 THE LD CIT(A) ERRED IN DENYING DEPRECIATION ON GOODWILL BASED ON EARLIER YEAR WHERE THE SAME WAS DISALLOWED ON TH E CONTENTION THAT THE SAME WAS INTERNALLY GENERATED, OVERLOOKING THE FACT THAT THE SAME WAS ACQUIRED IN A SCHEME OF TAKE OVER AND FOLL OWING THE DECISION OF APEX COURT IN THE CASE OF SMIFS SECURIT IES LTD (348 ITR 302) SAME IS ALLOWABLE. 4 ITANOS.776 & 947/CHNY/2018 CONTRIBUTION TO STAFF WELFARE FUND 6.1 THE LD CIT (A) ERRED IN NOT ALLOWING DEDUCTION IN RESPECT OF PROVISION TOWARDS CONTRIBUTION TO STAFF WELFARE FUN D OVERLOOKING THE MANDATORY REQUIREMENT OF THE EMPLOYER BANK TO CONTR IBUTE THE SAME AS PER RBI DIRECTION. 6.2 WITHOUT PREJUDICE TO THE ABOVE, THE CIT (A) SHO ULD HAVE ATLEAST ALLOWED THE AMOUNT ACTUALLY UTILIZED FROM THE FUND AS DEDUCTION SINCE IT IS EXPENDED FOR THE WELFARE ACTIVITIES OF THE EM PLOYEES OF THE APPELLANT. RECOVERY IN RESPECT OF BAD & DOUBTFUL DEBTS: 7.1 THE CIT(A) OUGHT TO HAVE DIRECTED THE AO NOT TO CHARGE TO TAX THE RECOVERY IN RESPECT OF BAD DEBTS WRITTEN OFF RELATI NG TO RURAL BRANCHES SINCE THE BAD DEBTS WRITTEN OFF RELATING TO RURAL B RANCHES WERE NEVER ALLOWED AS DEDUCTION IN ANY EARLIER YEAR. 7.2 THE CIT(A) OUGHT TO HAVE APPRECIATED THAT AO HA D CONSISTENTLY DISALLOWED BAD DEBTS WRITTEN OFF RELATING TO RURAL DEBTS WHICH ARE AVAILABLE IN THE ASSESSMENT RECORDS AND THEREFORE N O FRESH MATERIAL WAS REQUIRED TO BE PRODUCED BEFORE AO FOR ALLOWING THE CLAIM. DEPRECIATION ON UPS 8.1 THE CIT (A) ERRED IN CONFIRMING THE ORDER OF AO DISALLOWING THE CLAIM FOR DEPRECIATION ON UPS AT 80%, OVERLOOKING T HE FACT THAT UPS IS AN ENERGY SAVING DEVICE ENTAILING HIGHER DEPRECI ATION RATE. DEPRECIATION ON ATM 9.1 THE CIT (A) ERRED IN CONFIRMING THE ORDER OF AO DISALLOWING THE CLAIM FOR DEPRECIATION ON ATM AT 60%, OVERLOOKING T HE FACT THAT ATM IS A COMPUTER AS HELD BY VARIOUS JUDICIAL DECISIONS INCLUDING BOMBAY HIGH COURT IN THE CASE OF SARASWATINFOTECH LTD (ITA 1243 OF 2012) 3. FIRST, LET US TAKE THE APPEAL OF THE ASSESSEE. WITH REGARD TO GROUND NOS. 1.1, 1.2, 1.3, 1.4., THE LD. AR. SUBMITTED TH AT THESE ISSUES ARE ALREADY DECIDED AGAINST THE ASSESSEE BY THIS TRIBUN AL IN ITS ORDERS IN ITA NOS.496 & 497/MDS/2015 DATED 23.02.2016 AND ITA NO .77/MDS/2014 DATED 03.04.2017. COPY OF THE RELEVANT PORTION OF THE ORDERS ARE EXTRACTED HERE UNDER:- 5 ITANOS.776 & 947/CHNY/2018 ITA NO.496 & 497/2015: 8. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE M ATERIAL ON RECORD AND JUDICIAL DECISIONS, CIRCULARS, PROVISIONS AND ALSO BANK REGULATIONS. THE ASSESSEE HAS RAISED VARIOUS GROUNDS IN RESPECT OF ONE SUBSTANTIVE ISSUE THAT THE COMMISSIONER OF INCOME TAX ORDER IS BAD IN LAW AND ALSO DEDUCTION U/S.36(1)(VII) AND 36(1)(VIIA) SHALL BE IN RESPECT OF BOTH BAD AND DOUBTFUL DEBTS IRRESPECTIVE OF RURAL OR URBAN DEBTS. THE LE GISLATIVE INTENTION OF DECISION OF CATHOLIC SYRIAN BANK WAS TO PROTECT TH E RURAL FARMERS AND ALSO BENEFIT GIVEN WITHOUT ACTUAL WRITE OFF IN THE ACTUA L BOOKS OF ACCOUNTS THOUGH THE PRINCIPLE WAS CONSIDERED IN THE EARLIER YEARS AND THE DEPARTMENT HAS ACCEPTED AND PASSED THE ORDER. ON THE DECISION OF THE ALLOWABILITY OF SEC.36(1)(VIIA) WE RELIED ON THE CO-ORDINATE DECIS ION OF LAKSHMI VILAS BANK IN ITA NOS.1205 TO 1209/MDS/2014 DATED 29.01.2016, WHERE IT HAS BEEN HELD IN DETAIL AT PARA 90 TO 93 IN PAGE NO. 60 TO 63 90. AFTER EXAMINING THE VARIOUS CIRCULARS ISSUED B Y THE BOARD IN RELATION TO SECTION 36(1)(VIIA) AND 36(1)(VII) AND ALSO THE STATEMENT OF OBJECTS AND REASONS TO THE FINANCE ACT 1986, THE HO N'BLE SUPREME COURT CAME TO THE CONCLUSION THAT THE LEGISLATIVE INTENTI ON BEHIND THE INTRODUCTION OF SECTION 36(1)(VIIA) WAS TO ENCOURAGE RURAL ADVAN CES AND TO AID CREATION OF THE PROVISION FOR BAD DEBTS IN RELATION TO SUCH RURAL BRANCHES. SOME OF THE SALIENT FINDINGS OF THE HON'BLE SUPREME COURT A RE AS FOLLOWS: A MERE PROVISION FOR BAD AND DOUBTFUL DEBTS IS NOT AN ALLOWABLE DEDUCTION IN THE COMPUTATION OF TAXABLE PROFITS. HOWEVER, IN THE CAS E OF RURAL ADVANCES, IN LINE WITH THE POLICY TO PROMOTE RURAL BANKING, A PROVISI ON MAY BE ALLOWABLE U/S SEC.36(1)(VIIA), WITHOUT INSISTING ON AN ACTUAL WRI TE- OFF. PROVISIONS OF SECTIONS 36(1) (VII) AND 36(1)(VIIA) OF THE ACT ARE DISTINCT AND INDEPENDENT ITEMS OF DEDUCTION AND THEY OPERATE IN THEIR RESPECTIVE FIELDS. A SCHEDULED BANK MAY HAVE BOTH URBAN AND RURAL BRAN CHES. IT MAY GIVE ADVANCES FROM BOTH BRANCHES WITH SEPARATE PROVISION ACCOUNTS FOR EACH. IN THE NORMAL COURSE OF ITS BUSINESS, AN ASSESSEE BANK IS TO MAIN TAIN DIFFERENT ACCOUNTS FOR THE RURAL DEBTS AND FOR NON-RURAL/URBAN DEBTS. MAINTENA NCE OF SUCH SEPARATE ACCOUNTS WOULD NOT ONLY BE A MATTER OF MERE CONVENI ENCE BUT WOULD BE THE REQUIREMENT OF ACCOUNTING STANDARDS. THE BAD DEBTS WRITTEN OFF IN DEBTS, OTHER THAN THOS E FOR WHICH THE PROVISION IS MADE UNDER CLAUSE (VIIA), WILL BE COVERED UNDER THE MAIN PART OF SECTION 36(1)(VII), WHILE THE PROVISO WILL OPERATE IN CASES UNDER CLAUSE (VIIA) TO LIMIT DEDUCTION TO THE EXTENT OF DIFFERENCE BETWEEN THE D EBT OR PART THEREOF WRITTEN OFF IN THE PREVIOUS YEAR AND CREDIT BALANCE IN THE PROVISI ON FOR BAD AND DOUBTFUL DEBTS ACCOUNT MADE UNDER CLAUSE (VIIA). IN CASE OF RURAL ADVANCES WHICH ARE COVERED BY CLAU SE (VIIA), THERE WOULD BE NO DOUBLE DEDUCTION. THE PROVISO, IN ITS TERMS, LIMITS ITS APPLICATION TO THE CASE OF A 6 ITANOS.776 & 947/CHNY/2018 BANK TO WHICH CLAUSE (VIIA) APPLIES. INDISPUTABLY, CLAUSE (VIIA) APPLIES ONLY TO RURAL ADVANCES. IF THE AMOUNT OF BAD DEBT ACTUALLY WRITTEN OFF IN T HE ACCOUNTS OF THE BANK REPRESENTS ONLY DEBT ARISING OUT OF URBAN ADVANCES, THE ALLOWANCE THEREOF IN THE ASSESSMENT IS NOT AFFECTED, CONTROLLED OR LIMITED I N ANY WAY BY THE PROVISO TO CLAUSE (VII). A STATUE IS NOT NORMALLY CONSTRUED TO PROVIDE FOR A DOUBLE BENEFIT UNLESS IT IS SPECIFICALLY SO STIPULATED OR IS CLEAR FROM THE SCH EME OF THE ACT. PROVISO TO SEC 36(1)(VII) WOULD NOT PERMIT BENEFIT OF DOUBLE DEDUCTION, OPERATING WITH REFERENCE TO 'RURAL' LOANS, WHILE UNDER SECTIO N 36(1)(VII), THE ASSESSEE WOULD BE ENTITLED TO GENERAL DEDUCTION UPON AN ACCOUNT HA VING BECOME BAD DEBT AND BEING WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE FOR THE PREVIOUS YEAR. 91. A NUMBER OF CASES DECIDED BY THE HON'BLE HIGH COURTS AND ALSO BY THE APEX COURT ARE CITED / REFERRED TO IN THE AB OVE JUDGEMENT. CASES OF VIJAYA BANK VS. CIT (323 ITR 166) AND SOUTHERN TECH NOLOGIES VS JCIT (320 ITR 577) ARE REFERRED TO THEREIN. ACCOUNTING S TANDARD AS29 AND ALSO THE EFFECT OF BOARD'S CIRCULAR'S HAVE ALSO BEEN DIS CUSSED AT LENGTH IN THE ORDER ALONG WITH THE SUBJECT OF INTERPRETATION AND CONSTRUCTION OF THE RELEVANT SECTIONS. THUS, THE JUDGEMENT IS A COMPREH ENSIVE ONE WHICH HAS CONSIDERED THE RATIOS LAID DOWN BY VARIOUS COURTS, THE IMPLICATIONS OF BOARD'S CIRCULARS AND ACCOUNTING STANDARDS. 92. THE HON'BLE SUPREME COURT HAS HELD IN THE CASE OF CATHOLIC SYRIAN BANK THAT 'MERE PROVISION FOR BAD AND DOUBTFUL DEBTS MAY NOT BE ALLOWABLE, BUT IN THE CASE OF A RURAL ADVANCE, THE SAME, IN TERMS OF SECTION 3 6(1)(VIIA) MAY BE ALLOWABLE WITHOUT INSISTING ON AN ACTUAL WRITE OFF .IN CASE OF RURAL ADVANCES WHICH ARE COVERED BY CLAUSE (VIIA), THERE WOULD BE NO DOUBLE DEDUCTION. THE PROVISO, IN ITS TERMS, LIMITS ITS APPLICATION TO THE CASE OF A BANK TO WHICH CLAUSE (VIIA) APPLIES. INDISPUTABLY CLAUSE (VIIA) APPLIES ONLY TO RURAL AD VANCES.' (EMPHASIS SUPPLIED) (PARA 25&27). 93. THUS, IT CAN BE SEEN THAT IN THE CASE OF PROVI SION MADE TOWARDS NON-RURAL DEBTS, NO DEDUCTION CAN BE ALLOWED AS THE RE IS NO SPECIFIC PROVISION IN THE INCOME TAX ACT TO ALLOW THE SAME. THIS INDICATES THAT THE PROVISION MADE TOWARDS URBAN DEBT SHOULD BE ADDED B ACK AND ALLOWED ONLY WHEN BAD DEBTS ARE REALLY WRITTEN OFF. THE QUE STION OF DOUBLE DEDUCTION BEING ALLOWED DOES NOT ARISE THEREIN AT A LL, BECAUSE IT IS ALLOWED ONLY ON ACTUAL WRITE OFF. THE HONBLE APEX COURT HA S ALSO HELD THAT THE PROVISO TO SECTION 36(1)(VII) APPLY ONLY IN RESPECT OF RURAL DEBTS. IN VIEW OF THE ABOVE DECISION AND IN VIEW OF THE OPTION EXERCI SED BY THE ASSESSEE THAT IT CAN CLAIMS DEDUCTION ON DOUBTFUL DEBTS AS P ER OPTION (B) I.E. 7.5% OF GROSS TOTAL INCOME AND 10% OF AGGREGATE AVERAGE RUR AL ADVANCES, THE 7 ITANOS.776 & 947/CHNY/2018 ASSESSING OFFICER HAS RIGHTLY WORKED OUT THE ALLOWA BLE DEDUCTION, WHICH IS LESS THAN THAT OF THE PROVISION MADE BY THE ASSESSE E AS DOUBTFUL DEBTS, ALLOWED THE DEDUCTION OF BAD DEBTS FOR ALL ASSESSME NT YEARS AND REMAINING BALANCE WAS BROUGHT TO TAX. ACCORDINGLY, WE REVERSE THE ORDER OF THE LD. CIT(A) AND CONFIRM THE ADDITION MADE BY THE ASSESSING OFFICER FOR ALL THE ABOVE ASSESSMENT YEARS. THIS GROUND OF APPEAL OF THE REVENUE IS ALLOWED. CONSIDERING THE FACTS OF THE CO-ORDINATE DECISION W HERE THE PROVISION HAS BEEN RESTRICTED TO THE EXTENT OF RURAL BRANCHES ONL Y. WE CONFIRM THE FINDINGS OF THE COMMISSIONER OF INCOME TAX ON THE I SSUE OF RURAL BRANCHES FOLLOWING THE CATHOLIC SYRIAN BANK DECISION AND UP HOLD THE ORDER OF THE COMMISSIONER OF INCOME TAX. ACCORDINGLY, THE APPEA L OF THE ASSESSEE IN ITA NO. 496/MDS/2015 IS DISMISSED. 9. CONSEQUENTLY, THE APPEAL OF THE ASSESSEE IN ITA NO. 497/MDS/2015 IS ALSO DISMISSED. 10. IN THE RESULT, THE ASSESSEE APPEALS ITA NOS.496 & 49 7/MDS/2015 ARE DISMISSED. ITA NO.77/MDS/2014: 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. AS RIGHTLY POINTED OUT BY THE LD.A.R, THIS ISSUE WAS DECIDEDAGAINST THE ASSESSEE. BY THE CO-ORDINATE BENCH OF CHENNAI T RIBUNAL INASSESSEES OWN CASE FOR ASSESSMENT YEAR 2010-LI CITED SUPRA, W HEREIN TRIBUNAL HELD THAT: 60. WE HAVE PERUSED THE ABOVE ORDER OF THE CO-ORDI NATE BENCH OF THISTRIBUNAL IN ITA NO.1815/MDS/2011 DATED 2.4.2013 AND FIND THAT THE TRIBUNAL HAS DECIDED BOTH THESE ISSUES AGAINST THE ASSESSEE BY DISMISSING THE GROUNDS OBSERVING AS UNDER.- 4. THE THIRD GROUND OF APPEAL OF THE ASSESSEE IS R EGARDING RESTRICTION OF CLAIM IN RESPECT OF DEDUCTION UNDER SECTION 36(1)(V IIA) TO THE EXTENT OF PROVISION MADE IN THE BOOKS. THE AFT. FOR THE ASSES SEE HAS CONCEDED THAT THIS ISSUE HAS ALREADY BEEN DECIDED AGAINST THE ASS ESSEE BANK IN THE CASE OF BHARAT OVERSEAS BANK LTD. IN ITA NO. 1191/M DS/2012. THIS ISSUE HAD ALSO COME UP BEFORE THE TRIBUNAL IN ITA NO.818/ MDS/2OLO RELEVANT TO THE ASSESSMENT YEAR 2007-08. THE FINDINGS OF THE TR IBUNAL ARE REPRODUCED HEREIN BELOW: 7. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL SUBMISSIONS. THE ORIGINAL CLAIM, WHICH WAS ALLOWED BY THE ASSESSING OFFICER UNDER SECTION 36(1)(VIIA) OF THE ACT, WAS AS FOLLOWS: THEREAFTER, ASSESSEE HAD MOVED IN APPEAL AGAINST SO ME OF THE ADDITIONS MADE BY THE ASSESSING OFFICER ON OTHER ISSUES AND P URSUANT TO THE RELIEF 8 ITANOS.776 & 947/CHNY/2018 GRANTED IN SUCH APPEAL, THE GROSS TOTAL INCOME WHIC H EARLIER STOOD AT 76,54,31,493/- CAME DOWN TO 35,38,65,546/-. AS A RESULT OF THE REDUCTION IN GROSS TOTAL INCOME, DEDUCTION UNDER SE CTION 36(1)(VIIA) WAS ALSO SCALED DOWN FROM RS, 74,07,362/- TO RS.2,65,39 ,916/-. THIS SUM WHEN AGGREGATED WITH 10% OF RURAL ADVANCES COMING T O , 72,65,099/-, RESULTED IN THE SUM OF 5,38,05,015/- BEING EVENTUAL LY ALLOWED AS DEDUCTION UNDER SECTION 36(1(VIIA), OF THE ACT IN T HE BOOKS OF THE ASSESSEE, ACTUAL PROVISION FOR BAD AND DOUBTFUL DEB TS WAS ONLY 4,01,44,027/-. ASSESSEE HAD ALSO MADE A PROVISION O F 2.23 CRORES ON ITS STANDARD ASSETS, IF THE PROVISION FOR BAD AND DOUBT FUL DEBTS ALONE WAS CONSIDERED, THEN THE TOTAL ALLOWANCE UNDER SECTION 36(1))(VIIA) WAS IN EXCESS OF SUCH PROVISION. HOWEVER, IF THE PROVISION FOR STANDARD ASSETS WAS ALSO CONSIDERED AS PROVISION FOR BAD AND DOUBTF UL DEBTS,THEN THE TOTAL PROVISION COULD GO UP TO 6,24,44,027I-. THEN OF COURSE, ASSESSEES CLAIM AS FINALLY ALLOWED WAS WELL WITHIN THE LIMITS SPECI FIED UNDER SECTION 3(1)VIIA OF THE ACT. AT THIS JUNCTURE, A LOOK AT SE CTION 36(1)(VIIA) IS NECESSARY AND THIS IS REPRODUCED HEREUNDER, FOR BRE VITY. 36(1)(VIIA,) A SCHEDULED BANK [NOT BEING A BANK INC ORPORATEDBY OR UNDER THE LAWS OF A COUNTRY OUTSIDE INDIA OR A NONSCHEDUL ED BANK FOR A CO- OPERATIVE BANK OTHER THAN A PRIMARY AGRICULTURAL CR EDIT SOCIETY OR A PRIMARY CO-OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BAN K], AN AMOUNT [NOT EXCEEDING SEVEN AND ONE-HA/F PER CENT] OF THE TOTAL INCOME (COMPUTED BEFORE MAKING ANY DEDUCTION UNDER THIS CLAUSE AND C HAPTER VLV AND AN AMOUNT NOT EXCEEDING [TEN] PER CENT OF THE AGGREGAT E AVERAGE ADVANCES MADE BY THE RURAL BRANCHES OF SUCH BANK COMPUTED IN THE PRESCRIBED MANNER. IT IS CLEAR FROM THE ABOVE THAT IT IS NOT A STANDAR D ALLOWANCE WHICH IS GIVEN, BUT, THE ALLOWANCE IS SUBJECT TO THE ACTUAL PROVISI ON MADE BY THE ASSESSEE, WHICH IN NO CASE SHALT EXCEED 7.5% OF THE GROSS TOTAL INCOME. THEREFORE, THE ARGUMENT OF THE ASSESSEE THAT WHATEV ER THE PROVISION IT HAD ACTUALLY MADE IN ITS BOOKS, A PROVISION OF 7.5% OF THE GROSS TOTAL INCOME HAD TO BE ALLOWED, IS NOT IN ACCORDANCE WITH LAW. NOW CONSIDERING THE SECOND ASPECT, WHETHER PROVISION FOR STANDARD A SSETS COULD BE CONSIDERED AS PROVISION FOR BAD AND DOUBTFUL DEBTS, ADMITTEDLY A PROVISION ON STANDARD ASSETS IS NOT AGAINST ANY DEBTS WHICH H AD BECOME DOUBTFUL. STANDARD ASSETS ARE ALWAYSCONSIDERED RECOVERABLE, I N THE SENSE, BANK HAS NO DOUBT OF RECOVERABILITY. WHEN THE BANK ITSEL F HAS TREATED SUCH ASSETS AS GOOD AND RECOVERABLE, ANY PROVISION MADE ON SUCH ASSETS CANNOT BE CONSIDERED AS A PROVISION FOR BAD AND DOU BTFUL DEBTS. THE DEBT ITSELF BEING GOOD, A PROVISION MADE ON GOOD DEBT CA NNOT BE CONSIDERED AS A PROVISION FOR BAD AND DOUBTFUL DEBTS, MAY BE, THE RB! HAS MADE A FOR 10% PROVISION FOR STANDARD ASSETS ALSO A NORM. THIS CAN HOWEVER BE CONSIDERED AS AMEASURE PRESCRIBED IN ABUNDANT CAUTI ON, TO DEAL WITH A SITUATION WHERE BANKS ARE NOT TO SUFFER SHOCK OF SU DDEN DELINQUENCY THAT COULD HAPPEN IN FUTURE, THERE IS ALWAYS A POSSIBILI TY THAT AN ASSET, WHICH IS FULLY RECOVERABLE MAY NOT BE SO AT FUTURE DATE. NEVERTHELESS, POSSIBILITY OF HAPPENING OF SUCH A CONTINGENCY CANNOT BE A SUFF ICIENT REASON TO CONSIDER A PROVISION MADE ON STANDARD ASSETS ALSO A S A PROVISION FORBAD AND DOUBTFUL DEBTS, THEREFORE, CLAIM OF THE ASSESSE E THAT PROVISION FOR STANDARD ASSETS ALSO HAS TO BE CONSIDERED FOR APPLY ING THE CONDITION SAT OUT UNDER SECTION 36(1)(VIIA) IS NOT IN ACCORDANCE WITH LAW. IF THE PROVISION 9 ITANOS.776 & 947/CHNY/2018 FOR STANDARD ASSETS IS NOT CONSIDERED AS PROVISION FOR BAD AND DOUBTFUL DEBTS, THE ACTUAL PROVISION FOR BAD AND DOUBTFUL DE BTS MADE BY THE ASSESSEE IN ITS BOOKS 4,01,44,027/- FALL MUCH BELOW THE SUM OF 5,38,05,015/- ALLOWED BY THE ASSESSING OFFICER. IN ANY CASE, A LOOK INTO THE ORIGINAL ASSESSMENT ORDER CLEARLY SHOW THAT BUT FOR THE DEDUCTION ALLOWED TO THE ASSESSEE AS CLAIMED BY IT IN ITS RET URN, THERE WAS NO DISCUSSION AS TO HOW SECTION 36(1)(VIIA) WAS APPLIE D AND WHETHER THE LIMITS WERE CORRECTED WORKED OUT ADMITTEDLY, NO QUE STION WAS ASKED TO THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDING S ALSO WITH REGARD TO THE CLAIM MADE BY IT UNDER SECTION 36(1)(VIIA), INSOFAR AS IT CONCERNS THE QUANTUM OF SUCH CLAIM. THIS OBVIOUSLY SHOW THAT THERE WAS NO APPLICATION OF MIND BY THE ASSESSING OFFICER AT THE TIME OF ASSESSMENT. ASSESSING OFFICER HAD NOT COME TO ANY CONCLUSION AT ALL HAVING NOT CONSIDERED THE CLAIM IN THE LIGHT OF THE CONDITIONS SET OUT IN SECTION 36FTVIIA OF THE ACT. WE CANNOT SAY THAT HE HAD TAK EN A VIEW WHICH WAS IN ACCORDANCE WITH LAW. IT IS NOT A CASE WHERE THE ASS ESSING OFFICER HAD ADOPTED ONE OF THE COURSES POSSIBLE IN LAW. OF COUR SE, A CRYPTIC ORDER OF THE ASSESSING OFFICER BY ITSELF MAY NOT SHOW THAT T HERE WAS NO THOUGHT GIVEN: BY HIM ON A CLAIM OF THE ASSESSEE. HOWEVER, HERE THERE WAS IO ENQUIRY MADE DURING THE COURSE OF ASSESSMENT PROCEE DINGS. THEREFORE, THE ORDER WHICH WAS SILENT ON THE CLAIM MADE BY THE ASSESSEE, ANDALLOWING SUCH CLAIM, WITHOUT ANY DISCUSSION,: WI LL DEFINITELY RENDER IT ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVEN UE.AS HELD BY HONB!E APEX COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LT D. V. LT (243 ITR 83, PREJUDICIAL TO THE INTERESTS OF THE REVENUE IS A T ERM OF WIDE IMPORT AND NOT CONFINED TO LOSS OF TAX. AN ORDER WITHOUT APPLI CATION OF MIND IS DEFINITELY PREJUDICIAL TO THE INTERESTS OF THE REVE NUE. WE ARE IN AGREEMENT WITH ID. CIT THAT THE ORDER OF ASSESSING OFFICER WA S INSOFAR AS IT WAS PREJUDICIAL TO THE INTERESTS OF REVENUE.NO INTERFER ENCE IS REQUIRED. 8. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS D ISMISSED. IN VIEW OF THE AFORESAID FINDINGS, THIS GROUND OF A PPEAL OF THE ASSESSEE IS DISMISSED. 6.1 RESPECTFULLY FOLLOWING THE ABOVE DECISION OF TR IBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2010-11, WE REJECT THI S GROUND RAISED BY THE ASSESSEE. 4. WE HEARD THE RIVAL SUBMISSIONS. IN VIEW OF THE A BOVE FINDINGS OF THE TRIBUNAL IN ASSESSEES OWN CASE IN THE EARLIER ASSESSMENT YEARS, WE FIND NO REASON TO INTERFERE WITH THE ORDER OF THE L D. CIT(A) AND REJECT THE GROUNDS RAISED BY THE ASSESSEE. 10 ITANOS.776 & 947/CHNY/2018 5. WITH REGARD TO THE ALTERNATE CLAIM RAISED BY TH E ASSESSEEIN GROUND NO.2.1, AND THE ISSUE IN CONNECTION WITH PROTECTIVE DISALLOWANCE MADE U/S 36(1 )(VII) IN GROUND NO 3.1,SUPRA, THE LD. AR SUBMITTED THAT THIS ISSUE WAS DECIDED BY THE HONBLE SUPREME COURT IN F AVOUR OF THE ASSESSEE IN THE CASES OF VIJAYA BANK (323 ITR 166) AND CATHOLIC SYRIAN BANK LTD 348 ITR 270, RESPECTIVELY. WE HEARD THE RIVAL SUBMISSIONS AND DIRECT THE AO TO EXAMINE THESE ISSUES IN THE LIGHT OF THE HONBLE SUPREME COURT D ECISIONS IN THE CASE OF VIJAYA BANK (323 ITR 166) AND CATHOLIC SYRIAN BANK LTD 348 ITR 270, RESPECTIVELY. THE ASSESSEESHALL PLACE ALL THE MATER IALS IN SUPPORT OF ITS CONTENTIONS BEFORE THE AO AND COMPLY TO THE AOS RE QUIREMENTS AS PER LAW. THE A O SHALL FURNISH ADEQUATE OPPORTUNITY T O THE ASSESSEE ANDTHEN DECIDE THESE ISSUES IN ACCORDANCE WITH L AW. 6. THE NEXTISSUE RAISED BY THE ASSESSEE IS WITH R EGARD TO RESTRICTION OF TAX RELIEF U/S.90 ONLY TO THE EXTENT OF TAX PAID IN FOREIGN COUNTRY . IN THIS REGARD, THE LD. AR SUBMITTED THAT THIS ISSUE WAS DE CIDED AGAINST THE ASSESSEE BY THIS TRIBUNAL IN ITS OWN CASE IN ITA NO.77/MDS/2014 FOR THE ASSESSMENT YEAR 2011-12. 11 ITANOS.776 & 947/CHNY/2018 6.1 ON HEARING RIVAL CONTENTIONS, WE FIND THAT THI S ISSUE WAS DECIDED AGAINST THE ASSESSEE IN ITS OWN CASE FOR THE ASSESS MENT YEAR 2011-12 IN ITA NO.77/MDS/2014 VIDE ORDER DATED 03.04.2017. THE RELEVANT PORTION OF THE SAID ORDER IS EXTRACTED HERE UNDER:- 18. THE LAST GROUND: IN THIS APPEAL IS WITH. REGARD TO RESTRICTING THE RELIEF U/S.90 TO THE EXTENT OF TAX PAID IN THE FOREIGN COU NTRY. 19. WE HAVE HEARD BOTH THE PARTIES ARID PERUSED THE MATERIAL ON RECORD. IN OUR OPINION, THE SAME ISSUE CAME FOR CONSIDERATI ON BEFORE THE CO- ORDINATE BENCH OF CHENNAI TRIBUNAL IN ASSESSES OWN CASE FOR ASSESSMENT YEAR 2010-11 CITED SUPRA, WHEREIN TRIBUN AL HELD THAT:- 76. COUNSEL FOR THE ASSESSEE SUBMITS THAT THIS ISS UE HAS BEEN DECIDED AGAINST THE ASSESEE BY THE CO-ORDINATE BENCH FOR TH E ASSESSMENT YEAR 2009-10/N 174 NO.1949/MDS/2012 DATED 18.6.2014 AT P AGES 11 TO 13 IN PARAS 21 TO 25 OF THE ORDER, 77. WE HAVE PERUSED THE SAID ORDER OF THIS TRIBUNAL AND FIND THAT THE ISSUE HAS BEEN DECIDED AGAINST THE ASSESSEE HO/DING AS UNDER: 21. THE SEVENTH SUBSTANTIVE GROUND CHALLENGES THE C LTASORDER RESTRICTING RELIEF 90% OF THE TAX PAID IN FOREIGN C OUNTRIES 22. FACTUAL BACKDROP QUA THIS ISSUE IS THAT THE ASS ESSEEHADRAISED A CLAIM OF DOUBLE TAXATION RELIEF IN MEMO OF INCOME F ROM ITS OVERSEAS BRANCHES IN SOUTH KOREA, SINGAPORE, THAILAND, SRILA NKAANDHONG KONG AMOUNTING TO 357,573I- 21,32,37,338/- 7,84,71,232, , 42,94,845/- AND 39,80,57,968/- RESPECTIVELY. ITS THRUST WAS UPON VA RIOUS DOUBLE TAXATION AVOIDANCE AGREEMENTS DTAAS BETWEEN INDIA A ND THE SAID COUNTRIES EXCEPT HONG KONG. THE ASSESSING OFFICERHA D RESTRICTED THIS RELIEF @ 16.5% LE THE PREVAILING TAX RATE IN HONGKO NG. THEREAFTER, HE DISTINGUISHED CASE LAW PVAL .KULANDAGANCHETTIARVS C IT, 267 ITR 654 BY OBSERVING THAT CONTRARY TO THE FACTS OFTHIS CASE , SHRICHTTIAR WAS FISCALLY DOMICILED IN MALAYSIA AND DID NOTHAVE ANY PERMANENT ESTABLISHMENT IN INDIA. ON DTM WITH SOUTHKOREA, THE ASSESSING OFFICER WAS OF THE VIEW THAT THE TERMS CONTAINED THEREIN DI D NOT GIVE EXCLUSIVE RATE OF TAX TO THE CONCERNED COUNTRY AND IT HAD ONL Y PROVIDED FOR CREDIT METHODOF RELIEF IN DOUBLE TAXATION.ACCORDINGLY, HE DECLINED TO ACCEPT THE ASSESSES CLAIM. 23. COMING TO THE DTMS BETWEEN INDIA AND SINGAPORE, THAILARIDANDSRILANKA, THE ASSESSING OFFICER OBSERVE D THAT THEY ALSO RECOGNIZED CREDIT METHOD. HE ALLEGED THE ASSESSEE NOT TO HAVE PROVIDED ANYDIFFERENCE IN RATES OF TAX IN THE ABOVE STATED TAX 12 ITANOS.776 & 947/CHNY/2018 JURISDICTIONS.SIMULTANEOUSLY, THE ASSESSING OFFICER HELD THAT ON FURNISHING DETAILSONASSESSEES PART; THE CLAIM WOUL D BE ALLOWED IN ITS FAVOUR. THISRESULTED IN DISALLOWANCE/ADDITION OF 55 , 65,44,48/-. 24.IN LOWER APPELLATE ORDER, THE CIT(A) HAS QUOTED A NOTIFICATION NO. SO 2123(E) DATED 28.8.2008 REPORTED AS 304 ITR(ST )63, CLARIFYING THAT IN SUCH A CASE INVOLVING A DTAA, AN INCOME HAS TO BE I NCLUDED IN THE TOTAL RECEIPTS AND THE NECESSARY RELIEF IS TO BE GRANTED BY ELIMINATION METHOD OR AS PER THE TERMS OF AGREEMENT SEEKING TO AVOID DOUBLE TAXATION. HE RELIES UPON FINANCE ACT, 2012 INSERTIN G EXPLANATION 3 TO SECTION 90 MAKING THE NOTIFICATION RETROSPECTIVELY APPLICABLE. IN THIS MANNER, THE CIT(A) HAS DIRECTED THE ASSESSING OFFIC ER TO ALLOW RELIEF TO THE ASSESSEE AS PER THE AFORESAID NOTIFICATION. 25. WE HAVE HEARD BOTH PARTIES AND GONE THROUGH THE RELEVANT FINDINGS IN THE ORDERS OF ASSESSING OFFICER AS WELL AS THE C LTA,) THE PARTIES ARE UNANIMOUS BEFORE US THAT THIS VARY ISSUE STANDS DEC IDED IN THE REVENUES FAVOUR BY THE TRIBUNALSUPRA) IN PRECED ING ASSESSMENT YEAR. SO, WE ALSO FOLLOW SUITAND REJECT THE ASSESSEES RE LEVANT GROUNDS. 78 RESPECTFULLY FOLLOWING THE SAID DECISION, WE DIS MISS THE GROUND RAISED BY THE ASSESSEE ON THIS ISSUE. 6.2 IN VIEW OF THE ABOVE FINDINGS OF THIS TRIBUNAL, WE FIND NO REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT(A) ON THIS ISSUE AND REJECT THE GROUNDS RAISED BY THE ASSESSEE. 7. THE NEXT ISSUE RAISED BY THE ASSESSEE IS WITH RE GARD TO DENIAL OF DEPRECIATION ON GOODWILL AND THE LD. AR SUBMITTED T HAT THE BANK HAD DURING THE YEAR ENDED 31.01.2010 TAKEN OVER ASSETS &LIABILITIES OF SHREE SUVAMASAHAKARI BANK LTD. THE EXCESS OF LIABILITIES OVER ASSETS AMOUNTING TO 246,52,02,148/- HAS BEEN TREATED AS GOODWILL, DEPRECIATION ON THE SAID AMOUNT OF GOODWILL BASED O N THE WDV AS ON 01.04.2012 OF RS. 26,00,01,789/- HAS BEEN CLAIMED A S DEDUCTION 13 ITANOS.776 & 947/CHNY/2018 BASEDON THE DECISION OF SUPREME COURT IN THE CASE O F CIT VSSMIFT SECURITIES LTD (CIVIL APPEAL NO.5961 OF 2012 (ARISI NG OUT OF SLP (C) NO.35600 OF 2009) DATED 22.08.2012.THE AO REJECTED THIS CLAIM ON THE FOLLOWING REASONS: AS HELD BY THE ASSESSEE, ASSESSEE HAS TAKEN OVER T HE SPECIFIC ASSET AND LIABILITIES OF M/S.SHREESWATNASAHAKARI BANK LTD AS EXISTING AS ON 19.05.2009 AS PER THE APPROVAL OF RBI. ACCORDINGLY IT RESULTED IN EXCESS OF LIABILITIES OVER ASSETS ABSORBED ON ACCOUNT OF A BSORPTION SCHEME OF RB1. THE LIABILITIES ARE BALANCE SHEET ENTRIES AND SAME WILL BE CONSIDERED AS AND WHEN INCURRED OR PAID AS PER THE PROVISIONS OF IT ACT. CONSIDERING SUCH LIABILITIES AS GOOD WILL IS NEITHE R JUSTIFIABLE NOR BASED ON ANY PRUDENT ACCOUNTING NORMS/METHODS OF DUE DILI GENCE. ASSESSEES CONTENTION IS DEVOID OF MERITS AND SUPPORT OF LAW. AS PER THE DEFINITION OF THE GOODWILL AS MADE IN THE PROVISIONS OF IT ACT THE SAME IS READ AS UNDER:- FROM THE ABOVE IT IS CLEAR THAT THE ASSESSEE MERELY EQUATED EXCESS LIABILITIES AS ATTRIBUTABLE TO GOODWILL ON ACCOUNT OF ABSORPTION SCHEME IN FACT IT IS OPPOSITE TO THE GOODWILL AS DEFINED IN T HE IT ACT AS ABOVE AND SAME DO NOT QUALIFY ASSET LEAVE ALONE INTANGIBLE AS SET AS IT IS A LIABILITY. HENCE ASSESSEES CONTENTION TO THAT LIABILITY. HENC E ASSESSEES CONTENTION TO TREAT LIABILITY AS AN INTANGIBLE ASSE T IF FAR STRETCHED AND CONTRARY TO THE PROVISIONS OF IT ACT IN LATTER AND SPIRIT. ASSESSEE WAS REQUESTED TO RECONCILE THE GOOD WILL A S REFLECTED IN THE BOOKS OF THE ABSORBED CONCERN I.E. M/S1SHREE SWARNA SAHAKARIBANK LTD AS APPEARING IN THEIR BLOCK OF ASSETS PRIOR TO ITS ABSORPTION HENCE ASSESSEES NOTIONAL WORKING OF GOODWILL BASED ON EXC ESS LIABILITIES IS NOT ALLOWABLE AS INTANGIBLE ASSET QUALIFIED UNDER GOOD WILL. ANY ABSORPTION SCHEME SURPLUS OF ASSET OVER LIABI LITIES HAS TO BE TAKEN TO RESERVES ACCOUNT OF BALANCE SHEET. SUBSEQUENT TO ABSORPTION AS HELD BYHONBLE ITAT IN THE CASE OF SPENCER AND COMPANY L TD OF ITAT VIDE ITR NO.440 OF 2011. ON SIMILAR ANALOGY THE SURPLUS OF LIABILITIES OVER ASSETS HAS TO BE TAKEN TO THE BALANCE SHEET AND SAM E HAS NO BEARING ON PROFIT AND LOSS ACCOUNT OF ASSESSEE AS IT TANTAM OUNT TO SKEWED REPRESENTATION OF PROFITS ON THE YEAR OF ABSORPTION SO AS TO AVOID GENUINE TAXES DUE TO EXCHEQUER. 14 ITANOS.776 & 947/CHNY/2018 7.1 THELD. AR INVITED OUR ATTENTION TO THE COPY OF MEMORANDUM OF UNDERSTANDING FOR THE PROPOSED TRANSFEROR DATED 17 .02.2009 AND TO THE SCHEDULE TO THE MOU AND SUBMITTED THAT AS PER THE M OU, LIABILITIES TO BE TAKEN OVER AS ON 31.12.2008 WAS VALUED AT 1,078.13 CRORES AND THE ASSETS TO BE TAKEN OVER AS ON 31.12.2008 WAS VALUED AT 870.58 CRORES AND THE RESULTANT DEFICIT OF 207.55 CRORES WAS NOTIONALLY TREATED AS PURCHASE CONSIDERATION AND ARGUED THAT ON THIS AMO UNT THE ASSESSEE CLAIMED DEPRECIATION. IN SUPPORT OF HIS CONTENTION, HE RELIED ON THE JUDGEMENT OF THE HONBLE SUPREME COURT IN THE CASE OF SMIFS SECURITIES LTD.(348 ITR 302) DATED 22.08.2012. 7.2 PER CONTRA, THE LD. DR INVITED OUR ATTENTION T O PARA 12 OF THE MEMORANDUM OF UNDERSTANDING, WHICH IS EXTRACTED AS UNDER : 12. REGARDING GOODWILL:-SINCE THE BUSINESS OF TRAN SFEROR BANK IS UNDERMORATORIUM FROM 14/09/2006, THE TRANSFEROR BAN K DOES NOT ENJOY ANY GOODWILL IN COMMERCIAL TERMS. ACCORDINGLY , NO MONETARY CONSIDERATION ISPROVIDED FOR GOODWILL. AND SUBMITTED THAT AS PER THE AGREEMENT, IT IS CLE AR THE TRANSFEROR BANK DOES NOT ENJOY ANY GOODWILL IN COMMERCIAL TERMS AN D HENCE, THERE IS NO GOODWILL. THE LD. DR FURTHER INVITED OUR ATTENTION TO THE FOLLOWING PORTION OF THE JUDGEMENT OF THE HONBLE SUPREME COURT IN TH E CASE OF SMIFS SECURITIES LTD.(348 ITR 302) : 15 ITANOS.776 & 947/CHNY/2018 ASSESSING OFFICER, AS A MATTER OF FACT, CAME TO TH E CONCLUSION THAT NO AMOUNT WAS ACTUALLY PAID ON ACCO UNT OF GOODWILL. THIS IS A FACTUAL FINDING. THE COMMISS IONER OF INCOME TAX (APPEALS) [CIT(A), FOR SHORT] HAS C OME TO THE CONCLUSION THAT THE AUTHORISED REPRESENTATIVES HAD FILED COPIES OF THE ORDERS OF THE HIGH COURT ORDERI NG AMALGAMATION OF THE ABOVE TWO COMPANIES; THAT THE ASSETS AND LIABILITIES OF M/S. YSN SHARES AND SECUR ITIES PRIVATE LIMITED WERE TRANSFERRED TO THE ASSESSEE FO R A CONSIDERATION; THAT THE DIFFERENCE BETWEEN THE COST OF AN ASSET AND THE AMOUNT PAID CONSTITUTED GOODWILL AND THAT THE ASSESSEE-COMPANY IN THE PROCESS OF AMALGAMATION HAD ACQUIRED A CAPITAL RIGHT IN THE FORM OF GOODWIL L BECAUSE OF WHICH THE MARKET WORTH OF THE ASSESSEE- COMPANY STOOD INCREASED. THIS FINDING HAS ALSO BEEN UPHELD BY INCOME TAX APPELLATE TRIBUNAL [ITAT, FOR SHORT]. WE SEE NO REASON TO INTERFERE WITH THE FACT UAL FINDING AND SUBMITTED THAT THE DECISION OF THE SUPREME CO URT IS DISTINGUISHABLE ON FACTS OF THE ASSESSEES CASE. IN THE REPORTED CA SE, THE ASSETS AND LIABILITIES OF M/S. YSN SHARES AND SECURITIES PRIVA TE LIMITED WERE TRANSFERRED TO THE ASSESSEE FOR A CONSIDERATION; TH AT THE DIFFERENCE BETWEEN THE COST OF AN ASSET AND THE AMOUNT PAID CO NSTITUTED GOODWILL AND THAT THE ASSESSEE-COMPANY IN THE PROCESS OF AMA LGAMATION HAD ACQUIRED A CAPITAL RIGHT IN THE FORM OF GOODWILL BE CAUSE OF WHICH THE MARKET WORTH OF THE ASSESSEE-COMPANY STOOD INCREASE D. THIS FINDING HAS ALSO BEEN UPHELD BY INCOME TAX APPELLATE TRIBUN AL. HOWEVER, IN THE ASSESSEES CASE, THERE IS A DEFICIT OR LOSS OF 207.55 CRORES IN THE PURCHASE CONSIDERATION . FURTHER, AS PER TRANSFER A GREEMENT EXTRACTED , SUPRA, ITSELF IT IS CLEAR THAT THE TRANSFEROR BANK DOES NOT ENJOY ANY 16 ITANOS.776 & 947/CHNY/2018 GOODWILL IN COMMERCIAL TERMS AND HENCE, THERE IS N O GOODWILL. WHEN THERE IS NO GOODWILL AND THE ASSESSEE HAS ALSO NOT PAID ANY AMOUNT FOR GOODWILL IT IS NOT ENTITLED TO CLAIM ANY GOODWILL, CONSEQUENTLY NO DEPRECIATION CAN BE ALLOWED. 7.3 WE HEARD RIVAL SUBMISSIONS AND GONE THROUGH RE LEVANT MATERIAL. IT IS CLEAR FROM THE ABOVE THAT THE ASSESSEE DID NOT H AVE ANY GOODWILL IN COMMERCIAL TERMS AS IT HAS ACQUIRED MORE LIABILITI ES THAN THE ASSETS. THE LD.DRS SUBMISSION THAT WHEN THERE IS NO GOODWILL A S PER THE TERMS OF THE AGREEMENT AS WELL AS IN REALITY. WHEN THE ASSES SEE HAS NOT PAID ANY AMOUNT FOR THE GOODWILL, IT CANNOT CLAIM EXISTENCE OF ANY GOODWILL. WHEN THERE IS NO EXISTENCE OF GOODWILL, IT IS NOT ENTIT LED FOR ANY DEPRECIATION. THEREFORE, THE ASSESSEES CORRESPONDING GROUNDS FAI L. 8. THE NEXT GROUND RAISED BY THE ASSESSEE IS WITH R EGARD TO DISALLOWANCE OF CONTRIBUTION TO STAFF WELFARE FUND . THE LD. AR SUBMITTED THAT THIS ISSUE WAS DECIDED AGAINST THE ASSESSEE BY THIS TRIBUNAL IN ITS OWN CASE FOR THE ASSESSMENT YEAR 2011-12 IN ITA NO. 77/MDS/2014. 8.1 ON HEARING BOTH SIDES, WE FIND THAT THIS TRIBUN AL VIDE ORDER DATED 03.04.2017 IN ITA NO.77/MDS/2014 FOR THE ASSESSMENT YEAR 2011-12 HAS 17 ITANOS.776 & 947/CHNY/2018 DECIDED THIS ISSUE AGAINST THE ASSESSEE. THE RELEVA NT PORTION OF THE ORDER OF THIS TRIBUNAL, SUPRA, IS EXTRACTED AS UNDE R:- 12. THE THIRD GROUND IS WITH REGARD TO DISALLOWANCE OF CONTRIBUTIONOF STAFF WELFARE FUND. 13. AT THE OUTSET, THE LD. AR. SUBMITTED THAT THIS ISSUE CAME FORCONSIDERATION BEFORE THIS TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO.2126/MDS/2013(SUPRA). 14. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. AS RIGHTLY POINTED OUT BY THE LD. AR THIS I SSUE WAS DECIDED AGAINST THE ASSESSEE BY THE CO-ORDINATE BENCH OF CH ENNAI TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2010-11 CITED SUPRA, WHEREIN TRIBUNAL HELD THAT: 67. THE NEXT ISSUE IN THE APPEAL OF THE ASSESSEE I S THAT COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN NOT A LLOWING DEDUCTION IN RESPECT OF CONTRIBUTION TO STAFF WELFA RE FUND OVERLOOKING THE MANDATORY REQUIREMENT OF PAYMENT AS AN EMPLOYER . 68. AT THE TIME OF HEARING, COUNSEL FOR THE ASSESSE E SUBMITS THAT THIS ISSUE HAS BEEN DECIDED AGAINST THE ASSESSEE BY THE CO- ORDINATE BENCH FOR THE ASSESSMENT YEAR 2008-09 IN I TA NO.1815/MDS/2011 DATED 2.4.2013 IN PARA 14 OF THE O RDER. RESPECTFULLY FOLLOWING THE SAID ORDER OF THIS TRIBU NAL, WE DISMISS THE GROUND OF ASSESSEE ON THIS ISSUE. 14.1 RESPECTFULLY FOLLOWING THE ABOVE DECISION OF T RIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2010-11, WE REJECT THIS GROUND RAISED BY THE ASSESSEE. IN VIEW OF THE ABOVE, RESPECTFULLY FOLLOWING THE AB OVE ORDER OF THIS TRIBUNAL, WE REJECT THE CORRESPONDING GROUNDS OF APPEAL OF THE ASSESSEE. 9. THE NEXT GROUND RAISED BY THE ASSESSEEISWITH R EGARD TO RECOVERY OF BAD DEBTS WRITTEN OFF RELATING TO RURAL BRANCHES . THE LD. AR SUBMITTED 18 ITANOS.776 & 947/CHNY/2018 THATTHIS ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSE E BY THIS TRIBUNAL IN ITA NO35/MDS/2014VIDE ORDER DATED 03.4.2017. 9.1 HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORD ER OF THIS TRIBUNAL IN ITA NO.35/MDS/2017 DATED 03.04.2017. THE RELEVAN T PORTION OF THE ORDER OF THIS TRIBUNAL, SUPRA IS EXTRACTED HERE UND ER:- 27. THE FIFTH GROUND IS WITH REGARD TO ADDITION TOW ARDS BAD DEBTS RECOVERED. 27.1 AFTER HEARING BOTH THE PARTIES, THE SAME ISSUE CAME FOR CONSIDERATION BEFORE THIS TRIBUNAL IN ITA NO.1949/M DS./2012 VIDE ORDER DATED 18.06.2014 IN ASSESSES OWN CASE WHEREIN THE TRIBUNAL HELD THAT: 52. RELEVANT FACTS QUA THIS GROUND ARE THAT IN RS MEMO OF INCOME, THE ASSESSEE IS STATED TO HAVE CLAIMED DEDU CTION TOWARDS BAD DEBTS RECOVERED. IT EXPLAINED BEFORE THE ASSESS ING OFFICER THAT THIS AMOUNT PERTAINED TO RURAL ADVANCES WRITTE N OFF BUT NOT ALLOWED IN VARIOUS PRECEDING ASSESSMENT YEARS. IT S TRESSED THE FACT THAT WHEN BAD DEBTS ITSELF HAD BEEN DISALLOWED AS DEDUCTION, RECOVERY THEREOF COULD NOT HAVE BEEN TAXED IN THE I MPUGNED ASSESSMENT YEAR. THE ASSESSING OFFICER HELD THAT TH EASSESSEE HAD ORDINARILY CLAIMED THE ABOVE BAD DEBTS WRITTEN OFF AS EXPENDITURE. FURTHER, HE OBSERVED THAT IT HAD A/SO FIFED APPEALS BEFORE THE TRIBUNAL AND THE ISSUE WAS YET TO ATTA IN FINALITY. ACCORDINGLY, HE DISALLOWED THE AFORESAID AMOUNT. 53. IN LOWER APPELLATE ORDER, THE CIT(A) HOLDS THAT THE RECOVERY MADE IN RESPECT OF BAD DEBTS COULD BE TAXED ONLY IF THE BAD DEBTS THEMSELVES ARE ALLOWED AS A DEDUCTION BY QUOTING SE CTION 41(4) IN SUPPORT. HE DISAGREES WITH THE ASSESSING OFFICER AF TER EXPRESSING AN OPINION THAT WHEN THE BAD DEBTS WRITTEN OFF HAD NOT BEEN ALLOWED AS A DEDUCTION, THE SAME CANNOT BE TAXED AG AIN. THEREFORE, THE REVENUE HAS RAISED THE INSTANT GROUN D. 54. WE HAVE HEARD BOTH PARTIES AND GONE THROUGH THE ORDERS OF ASSESSING OFFICER AND CIT(A). EVEN THE REVENUE DOES NOT DISPUTE THAT THE ASSESSEE HAD RAISED ITS CLAIM OF DEDUCTION OF BAD DEBTS RELATING TO THE VERY SUMS IN PRECEDING ASSESSMENT Y EARS. THE ASSESSING OFFICER DID NOT ALLOW THIS RELIEF IN RELE VANT PREVIOUS YEAR, WHEN IT HAS RECOVERED THE AFORESAID DEBTS, THE REVE NUE IS AGAIN SEEKING TO TAX THE SAME. THERE IS NO COGENT EVIDENC E BEFORE US TO 19 ITANOS.776 & 947/CHNY/2018 DISPUTE THIS FACTUAL POSITION MOREOVER, THE CIT(A) HASCITED SECTION 41(4) OF THE ACT WHILST GRANTING RELIEF .THE REVENU E HAS FAILED TO POINT OUT ANY LEGAL OR FACTUAL ERROR INCIT(A)S FIN DINGS THEREFORE, THE SAME ARE AFFIRMED. HOWEVER, AS A MATTER OF CAUT ION, WE OBSERVE THAT THEASSESSEES CLAIM OF BAD DEBTS PERTA INING TO THOSE SUMS INPRECEDING ASSESSMENT YEARS, IF ANY, SHALL BE DEEMED TO HAVE BEEN DISMISSED. WITH THESE OBSERVATIONS, THE R EVENUES GROUND IS REJECTED. IN VIEW OF THE ABOVE ORDER OF TRIBUNAL, WE DISMISS THE GROUND RAISED BY THE REVENUE. FURTHER, WE MAKE IT CLEAR THAT IF IT I S ALLOWED AS BAD DEBT IN EARLIER YEARS AND RECOVERED THE SAME IN THE ASSE SSMENT YEAR UNDER CONSIDERATION TO BE TREATED AS INCOME OF ASSESSEE. 9.2 RESPECTFULLY FOLLOWING THE ABOVE ORDER OF THIS TRIBUNAL, WE ALLOW THESE GROUNDS OF THE ASSESSEE SUBJECT TO THE ABOVE LINES. 10. THE NEXT GROUND RAISED BY THE ASSESSEE ISWITH REGARD TO DEPRECIATION ON UPS ALLOWED AT 60% INSTEAD OF 80% C LAIMED BY THE ASSESSEE. THE LD. AR SUBMITTED THAT THIS ISSUE WAS DECIDED AGAINST THE ASSESSEEBY THIS TRIBUNAL IN ITA NO,77/MDS/2014 DATE D 3.4.2017 FOR THE ASSESSMENT YEAR 2011-12. 15. THE FOURTH GROUND IN THIS APPEAL IS WITH REGARD TO DISALLOWING THE CLAIM OF DEPRECIATION ON UPS AT 80% OVERLOOKING THE FACT THAT UPS ISAN ENERGY SAVING DE VICE ENTAILING FOR HIGHER DEPRECIATION. 16. AT THE TIME OF HEARING, THE ID.A.R SUBMITTED TH AT THIS ISSUE CAME FOR CONSIDERATION BEFORE THIS TRIBUNAL I N ASSESSEES OWN CASE IN I.T.A.NO.2L26/MDS/2013(SUPRA ) AND THE TRIBUNAL DECIDED THE ISSUE AGAINST THE ASSE SSEE. 17. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. AS RIGHTLY POINTED OUT BY THE I D.A.R, THIS ISSUE WAS DECIDED AGAINST THE ASSESSEE BY THE CO- 20 ITANOS.776 & 947/CHNY/2018 ORDINATE BENCH OF CHENNAI TRIBUNAL IN ASSESSES OWN CASE FOR ASSESSMENT YEAR 2010-11 CITED SUPRA, WHEREIN TR IBUNAL HELD THAT: 69. THE NEXT ISSUE IN THE GROUNDS OF APPEAL OF THE ASSESSEEIS THAT COMMISSIONER OF INCOME TAX (APPEALS ) ERRED IN CONFIRMING THE ORDER OF THE ASSESSING OFFI CER DISALLOWING THE CLAIM OF DEPRECIATION ON UPS AT 80% OVERLOOKING THE FACT THAT UPS IS AN ENERGY SAVING D EVICE ENTAILING FOR HIGHER DEPRECIATION. 70. COUNSEL FOR THE ASSESSEE SUBMITS THAT THIS ISSU E HAS BEEN DECIDED AGAINST THE ASSESSEE BY THE CO-ORDINAT E BENCH FOR THE ASSESSMENT YEAR 2009-10 IN ITA NO.1949/MDS/2012 DATED 18.6.2014 AT PAGES 10 & 11 I N PARA 16 TO 18 OF THE ORDER. RESPECTFULLY FOLLOWING THE SAID DECISION, WE DISMISS THE GROUNDS RAISED BY THE ASSE SSEE ON THIS ISSUE. RESPECTFULLY FOLLOWING THE ABOVE DECISION OF TRIBUN AL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2010-11, WE REJECT THIS GROUND RAISED BY THE ASSESSEE. IN VIEW OF THE ABOVE REASONING OF THIS TRIBUNAL, WE REJECT THIS ISSUE RAISED BY THE ASSESSEE . 11. THE NEXT GROUND RAISED BY THE ASSESSEE ISWI TH REGARD TO THE DEPRECIATION ON ATM. THE LD. AR SUBMITTED THAT THIS ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE BY THE HONBLE BOMBAY HIG H COURT IN THE CASE OF CIT VS.SARASWATINFOTECH LTD. IN ITA(L) NO.1243 O F 2012. ON HEARING BOTH SIDES, WE FIND THAT THE HONBLE BOMBAY HIGH CO URT IN THE ABOVE CITED CASE HAS HELD AS UNDER:- 21 ITANOS.776 & 947/CHNY/2018 5) IN SECOND APPEAL, THE TRIBUNAL BY ITS ORDER DATE D 14.03.2012 HELD THAT UPS IS AN INTEGRAL PART OF THE COMPUTER SYSTEM AND REGULATE THE FLOW OF POWER TO AVOID ANY KIND OF DAMAGE TO THE COMPUTER N ETWORK DUE TO FLUCTUATION IN POWER SUPPLY WHICH COULD LEAD TO LOS S OF VALUABLE DATA. THE TRIBUNAL RELIED UPON THE DECISION OF DELHI HIGH COU RT DATED 20/1/2011 IN THE MATTER OF CIT VS. ORIENT CERAMICS & INDUSTRIES LTD IN WHICH UPS WAS HELD TO BE THE PART OF THE COMPUTER SYSTEM AND DEPR ECIATION AT 60% WAS ALLOWED. SIMILARLY, SO FAR AS ATMS ARE CONCERNED, T HE TRIBUNAL ON FINDING OF FACT CONCLUDED THAT ATM CANNOT FUNCTION WITHOUT THE HELP OF COMPUTER AND WOULD BE A PART OF THE COMPUTER USED IN THE BAN KING INDUSTRY. RELIANCE WAS PLACED BY THE TRIBUNAL UPON THE DECISI ON OF THE DELHI BENCH OF TRIBUNAL IN THE MATTER OF DCIT V. GLOBAL TRUST B ANK (ITA NO.474/D/09) WHEREIN IT HAS BEEN HELD THAT ATM WAS A COMPUTER EQ UIPMENT AND DEPRECIATION @ 60% WAS ALLOWED. SO FAR AS THE USE O F SOFTWARE IS CONCERNED, THE TRIBUNAL RECORDS A FACT THAT THE EVI DENCE OF THE USE OF THE SOFTWARE ON 31/3/2008 WAS PRODUCED BEFORE THE TRIBU NAL. THUS, THE TRIBUNAL HELD THAT DEPRECIATION @ 30% ON SOFTWARE W AS RIGHTLY CLAIMED. RESPECTFULLY FOLLOWING THE JUDGEMENT OF THE HONBLE HIGH COURT IN THE CASE OF SARASWATINFOTECH LTD., SUPRA, WE ALLOW THI S GROUND OF THE ASSESSEE . 11.1 IN THE RESULT, THE ASSESSEES APPEAL IS PARTL Y ALLOWED. ITA NO.947/CHNY/2018:(REVENUE APPEAL) 12. NOW, LET US CONSIDER THE APPEAL OF THE REVENUE. THE REVENUE RAISED THE FOLLOWING GROUNDS:- 1. THE ORDER OF THE LEARNED CIT(A) IS CONTRARY TO L AW AND FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LEARNED CIT(A) HAS FAILED TO OBSERVE THAT TH E DEDUCTION U/S36(1)(VIIA) NEEDS TO BE CALCULATED BASED ON THE INCREMENTAL ADVANCES FOR EACH MONTH AND NOT ON THE OUTSTANDING ADVANCE AS ON THE LAST DAY OF THE RELEVANT MONTH. 3. THE LEARNED CIT(A) OUGHT TO HAVE SEEN THAT THE P ROVISIONS OF SEC.14A ARE APPLICABLE IN THE CASE OF THE ASSESSEE AS THE 22 ITANOS.776 & 947/CHNY/2018 ASSETS YIELDING EXEMPT INCOME ARE HELD BY THE ASSES SEE AS STOCK AND TRADE AND NOT AS INVESTMENT. 4. THE LEARNED CIT(A) HAS ERRED IN ALLOWING THE CLA IM OF DEDUCTION FOR PROVISION MADE FOR LEAVE ENCASHMENT W ITHOUT MAKING ACTUAL PAYMENT WHICH IS CONTRARY TO THE PROV ISIONS OF SEC. 43B. 5. THE LEARNED CIT(A) HAS ERRED IN ALLOWING THE DEP RECIATION @ 60% ON UPS HOLDING IT AS PART OF COMPUTER AS AGAINS T 15% ALLOWED BY THE ASSESSING OFFICER HOLDING IT AS PART OF ELECTRICAL APPLIANCE. 6. THE LEARNED CIT(A) HAS FAILED TO GIVE ANY FINDIN G IN THE ORDER WITH REGARD TO THE EXCESS CLAIM OF DEPRECIATION ON ASSETS WHICH WERE TAKEN FROM THE BANK OFTAMILNADU LIMITED AT THE TIME OF AMALGAMATION. 7. THE LEARNED CIT(A) HAS FAILED TO OBSERVE THAT TH E PROVISIONS OF SEC.115JB ARE APPLICABLE EVEN IN RESPECT OF BANK S WHICH ARE GOVERNED BY BANKINGREGULATORY ACT, 1949. 8. THE LEARNED CIT(A) HAS ERRED IN NOT ADJUDICATING ON THE ADDITIONS MADE TO BOOK PROFIT U/S 115JB ERRONEOUSLY OBSERVING THAT THE PROVISIONS OF SEC.115JB ARE NOT APPLICABLE IN RESPECT OF BANKS WHICH ARE GOVERNED BY BANKING REGULATORY ACT, 1949. 13. WITH REGARD TO THE CLAIM THAT THE DEDUCTION U/S36(1)(VIIA) NEEDS TO BE CALCULATED BASED ON THE INCREMENTAL ADVANCES FOR EACH MONTH AND NOT ON THE OUTSTANDING ADVANCE AS ON THE LAST DAY O F THE RELEVANT MONTH, THE LD. DR SUBMITTED ON THE LINES OF GROUNDS OF APP EAL. PER CONTRA, THE LD.AR SUBMITTED THAT THIS ISSUE WAS DECIDED BY THIS TRIBUNAL IN FAVOUROF THEASSESSEE IN ITA NO.77/MDS/2014 VIDE ORDER DATED 03.04.2017. THE RELEVANT PORTION OF THE SAID ORDER OF THIS TRIBUNAL IS EXTRACTED AS UNDER:- 23 ITANOS.776 & 947/CHNY/2018 NEXT WE TAKE UP REVENUES APPEAL IN ITA.NO.35/MD S/2014 THE FIRST ISSUE IN THE APPEAL OF THE REVENUE IS THA T COMMISSIONER TAX (APPEALS) ERRED IN DIRECTING THE ASSESSING OFFI CER TO THE AGGREGATE AVERAGE ADVANCES OUTSTANDING AT THE END O F EACH MONTH AND NOT THE INCREMENTAL ADVANCES GRANTED DURI NG EACH MONTH WHILE COMPUTING DEDUCTION UNDER SECTION 36(I) (VIIA) OF THE ACT. 22. WE HAVE HEARD THE SUBMISSIONS OF THE COUNSEL AN D PERUSED THEMATERIAL ON RECORD. IN OUR OPINION, THIS ISSUE I S SQUARELY COVERED BYTHE DECISION OF THE CO-ORDINATE BENCH OF CHENNAI TRIBUNAL INASSESSEES OWN CASE IN 1TA NO.2O3L/MDS./ 2013 FOR ASSESSMENT YEAR2010-11 WHEREIN HELD THAT:- 80. AT THE TIME OF HEARING COUNSEL FOR THE ASSESSE E SUBMITS THAT THE PRESENT ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THIS TRIBUNAL FOR THE ASSESSMENT YEAR 2009-10/N J74 NO. 1949/MDS/20.T2 DATED 18.6.2014 AT PAGES 24 TO 26 IN PARES 55 TO 59 OF THE ORDER. HE PLACES RELIANCE ON THE SAID ORD ER. DEPARTMENTAL REPRESENTATIVE RELIES ON THE ORDER OF THE ASSESSING OFFICER. 81. SIMILAR ISSUE HAS BEEN RAISED BY THE REVENUE IN 17A NO.2030/MDS/2013 FOR THE ASSESSMENT YEAR 2007-08 AN D WE HAVE DEALT WITH THIS ISSUE IN PARA 51 & 52 OF THIS ORDER . FOR THE REASONS MENTIONED THEREIN AND THE DECISION HOLDS GOOD FOR T HE ASSESSMENT YEAR 2010-11, WE REJECT THE GROUNDS RAISED BY THE R EVENUE ON THIS ISSUE. 22.1 IN VIEW OF THE ABOVE ORDER OF TRIBUNAL IN THE APPEAL OF REVENUE, WE DISMISS THE GROUND RAISED BY THE REVENU E RESPECTFULLY FOLLOWING THE ABOVE DECISIONS, THE GRO UNDS OF THE REVENUE ARE DISMISSED. 14. THE NEXT GROUND RAISED BY THE REVENUE IS AGAINS T THE DISALLOWANCE UNDER SECTION 14A. THE LD. DR SUBMITTED ON THE LI NES OF GROUNDS OF APPEAL. HOWEVER, THE LD AR SUBMITTED THAT THIS ISS UE WAS DECIDED IN FAVOUR OF THE ASSESSEE BY THE HONBLE SUPREME COURT IN THE CASE OF MAXOPP INVESTMENT LTD (402 ITR 640) AND THIS TRIBUN AL IN ITA NO.77/MDS/2014 VIDE ORDER DATED 03/04/2017 DECIDED PARTLY IN THE 24 ITANOS.776 & 947/CHNY/2018 ASSESSEESFAVOUR IN ITS OWN CASE. THE RELEVANT PORT ION OF THE ORDER OF THIS TRIBUNAL DATED 03.04.2017 IS EXTRACTED AS UNDER:- 8. THE SECOND GROUND IS WITH REGARD TO DISALLOWANCE U/S.14AR.W.RULES 8D OF THE INCOME TAX RULES, 1962. 9. AT THE OUTSET, THE ID.A.R SUBMITTED THAT THIS IS SUE CAME FORCONSIDERATION BEFORE THIS TRIBUNAL IN ASSESSEES OWN CASE IN IT.A .NO.2126/MDS/20 13(SUPRA) WHEREIN THE TRIBUNAL HELD THAT:P63. COUNS EL FOR THE ASSESSEE SUBMITS THAT ASSESSEE BANK IS HOLDING SECURITIES AS STOCK-IN-TRADE, WHEN ONCE SECURITIES ARE HELD AS STOCK-IN-TRADE, NO DISA LLOWANCE UNDER SECTION 14A IS WARRANTED. THE COUNSEL SUBMITS THAT CO-ORDIN ATE BENCH OF THIS TRIBUNAL DECIDED SIMILAR ISSUE FOR THE ASSESSMENT Y EAR 2009-10 IN ITA NO.1949/MDS/2012 DATED 18.6.2014. REFERRING TO THE SAID ORDER, COUNSEL SUBMITS THAT IN PRINCIPLE, THE TRIBUNAL DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE HOLDING THAT PROVISIONS OF SECTION 14A HAV E NO APPLICATION WHEN THE SECURITIES ARE HELD AS STOCK-IN-TRADE. HOWEVER, THE TRIBUNAL REMITTED THE MATTER TO THE FILE OF THE ASSESSING OFFICER TO ASCERTAIN WHETHER SECURITIES ARE HELD AS STOCK-IN-TRADE. 64. DEPARTMENTAL REPRESENTATIVE PLACES RELIANCE ON THE ORDERS OF LOWER AUTHORITIES IN INVOKING PROVISIONS OF SECTION 14A R EAD WITH RULE 8D FOR THE PURPOSE OF DISALLOWING EXPENDITURE ATTRIBUTABLE FOR EARNING DIVIDEND INCOME. 65. WE HAVE PERUSED THE ORDER OF CO-ORDINATE BENCH OF THIS TRIBUNAL FOR THE ASSESSMENT YEAR 2009-10, WHEREIN THE TRIBUNAL H ELD THAT AUTHORITIES BELOW HAVE WRONGLY INVOKED SECTION 14A IN CASE OF I NVESTMENTS HELD AS STOCK-IN-TRADE. WHILE HOLDING SO THE TRIBUNAL OBSER VED AS UNDER:15. WE HAVE CONSIDERED THE RIVAL CONTENTIONS, PERUSED THER ELEVANT FINDINGS AND THE JUDICIAL PRECEDENTS UNDISPUTEDLY, THE ASSESSE H AD EARNED INCOME OF 21 CRORES FROM INVESTMENTS MADE IN MUTUAL FUNDS AND EQUITIES. ITS STAND ADOPTED THROUGHOUT HAS BEEN TO HAVE HELD THE INVEST MENTS AS STOCK-IN- TRADE. THERE IS NO FINDING ON THIS ISSUE FORTHCOMI NG EITHER FROM THE ASSESSING OFFICER ORTHE CIT(A). WE HAVE ALSO PERUSE D THE GUARD FIFE PERTAINING TOL.T.A.NO. 1815/MDS/2011 DECIDED ON 2.4 .2013(SUPRA). IT IS EVIDENT THERE FROM THAT THE VERY DISALLOWANCE STAND S UPHELD BY A CO- ORDINATE BENCH. ITS PLEA CHALLENGING APPLICABILITY OF SECTION 14A IN CASE OF INVESTMENT HELD AS STOCK-IN- TRADE APPEARS TO HAV E NEITHER BEEN RAISEDNOR ADJUDICATED. SO, WE TREAT IT AS A FRESH P LEA NOT COVERED BY THEEARLIER ORDER. THUS, THE NEW ISSUE THAT ARISES F OR OUR CONSIDERATION ISAS TO WHETHER A DISALLOWANCE U/S 14A CAN BE MADE EVEN IN A CASE WHEN THE INVESTMENTS GIVING RISE TO AN EXEMPT INCOME ARE H ELD ASSTOCK-INTRADE OR NOT. PROCEEDING ON THE SAME, WE FIND THAT THE CASEL AW QUOTED BY THE ASSESSEE (SUPRA) SQUARELY SUPPORTS ITS PLEA. THE RE VENUE HAS BROUGHT TO OUR NOTICE A RECENT THIRD MEMBER DECISION INCASE OF D.H. SECURITIES P. LTD VS DCIT (2014] 31 (TRIB) 25 ITANOS.776 & 947/CHNY/2018 381. THIS DECISION FOLLOWS THE JUDGMENT OF THE HON BLE BOMBAY HIGH COURT (WHICH IS ALSO THE CONCERNED JURISDICTIONAL HIGH CO URT) IN CASE OF GODREJ & BOYCE MANUFACTURING CO. LTD VS A CIT, 328 ITR 81 AN D THAT OF HONBLE CALCUTTA HIGH COURT IN DHANUKA& SONS VS CIT, 339 IT R 319. NOTONLY THIS, THE HONBLE THIRD MEMBER ALSO REFERS TO THE CASE LA W CC! LTD.(SUPRA) AND EXPRESSES A VIEW THAT THE AFORESAID DECISIONS OF OT HERHONBLE HIGH COURTS WERE NOT BROUGHT TO THE NOTICE OF THE KARNATAKAHIGH COURT. IN THESE CIRCUMSTANCES, THE PICTURE THAT EMERGES IS THATVARI OUS HIGH COURTS HAVE EXPRESSED DIVERGENT OPINIONS ON THIS LEGALISSUE. TH AT BEING THE CASE, WE APPLY THE DECISION OF CIT VS VEGETABLE PRODUCTS LTD 88 ITR 192 AND IN THE VIEW FAVOURABLE TO THE ASSESSEE IS FOLLOWED. SO, IN PRINCIPLE, WE HOLD THAT THE AUTHORITIES BELOW HAVE WRONGLY INVOKED SECTION 14A IN CASE OF INVESTMENTS HELD AS STOCK-IN TRADEWHEREIN THE EX EMPT INCOME BY WAY OF DIVIDENDS IS ONLY INCIDENTAL. IT IS ALSO MADE CLEAR THAT SINCE THERE IS NO VERIFICATION OF THE FACTUAL POSITION OF INVESTMENTS HELD AS STOCK-IN-TRADE, WE ACCEPT THE ASSESSEES CONTENTIONS IN PRINCIPLE O NLY AND REMIT THE ISSUE BACK TO THE ASSESSING OFFICER TO DETERMINE THE TRUE FACTUALPOSITION. THE ASSESSEES ALTERNATIVE PLEA CARRIES ONLY AN ACADEMI CSIGNIFICANCE. THE RELEVANT GROUND IS ACCEPTED FOR STATISTICAL PURPOS ES. 66. SINCE THE FACTS AND CIRCUMSTANCES ARE IDENTICAL , FOLLOWINGTHE SAID DECISION OF THIS TRIBUNAL, WE ALLOW THE GROUND RAIS ED BYTHE ASSESSEE. 10. ON THE OTHER HAND, THE LD.D.R RELIED ON THE ORD ERS OF THE LOWER AUTHORITIES IN INVOKING THE PROVISIONS OF THE SECTI ON 14A R.W.RULE 8D HE FURTHER SUBMITTED FOR ASSESSMENT YEAR 2008-09, THE SAME ISSUE WAS DECIDED AGAINST THE ASSESSEE. 11. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. WE HAVE GONE THROUGH THE ORDER OF THE ASSESSMENT OR DER. THERE IS NO FINDING IN THE ASSESSMENT ORDER REGARDING TREATMENT OF EXEMPTED INCOME YIELDING ASSETS AS STOCK-IN-TRADE. HENCE, IN OUR OP INION, IF IT IS TREATED AS STOCK-IN-TRADE BY THE ASSESSEE, THEN THE CLAIM OF A SSESSEE IS TO BE ALLOWED IN TERMS OF ORDER OF TRIBUNAL IN ITA NO.212 6/MDS./2013 (SUPRA). ACCORDINGLY, THIS ISSUE IS REMITTED TO THE FILE OF AO FOR FRESH CONSIDERATION. THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSES. IN VIEW OF THE ABOVE REASONING OF THIS TRIBUNAL, FO LLOWING IT , WEREMIT THISISSUE BACK TO THE FILE OF AO FOR FRESH CONSIDE RATION. THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 26 ITANOS.776 & 947/CHNY/2018 15. THE NEXT GROUND RAISED BY THE REVENUE IS AGAINS T THE DISALLOWANCE OF PROVISIONMADE FOR LEAVE SALARY ON ACTUARIAL VAL UATION.WITH REGARD TO THE ISSUE ON LEAVE SALARY, THE AO HELD THAT IT IS O NLY A PROVISION AND HENCE DISALLOWED. AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A) AND THE LD. CIT(A) ALLOWED THE APPEAL BASED ON THIS TRIBUNALS DECISION IN ASSESSEES CASE FOR ASSESSME NT YEAR 2010-11 IN ITA NO.2031/MDS/2013 DATED 26.09.2014. BEFORE US, T HE ASSESSEE SUBMITTED THAT THE PROVISION FOR LEAVE SALARY CAN NOT BE DISALLOWED U/S. 43B FOR THE REASON THAT LEAVE PROVISION IS A CONTRA CTUAL LIABILITY AND THEREFORE, IT CANNOT BE TREATED AT PAR WITH TAX, DU TY, CESS OR FEE U/S. 43B. HOWEVER, IN THE SLP (CIVIL) NOS. 22889/2008 DATED 0 8.05.2009 IN THE CASE OF CIT &ORS. VS M/S. EXIDE INDUSTRIES LTD & AN R, WHEREIN, THE APEX COURT HELD THAT PENDING HEARING AND FINAL DISPOSA L OF THE CIVIL APPEAL, DEPARTMENT IS RESTRAINED FROM RECOVERING PENALTY A ND INTEREST WHICH HAS ACCRUED TILL DATE. IT IS MADE CLEAR THAT AS FAR AS THE OUTSTANDING INTEREST DEMAND AS OF DATE IS CONCERNED, IT WOULD BE OPEN TO THE DEPARTMENT TO RECOVER THAT AMOUNT IN CASE CIVIL APPEAL OF THE DEP ARTMENT IS ALLOWED. WE FURTHER MAKE IT CLEAR THAT THE ASSESSEE WOULD, D URING THE PENDENCY OF THIS CIVIL APPEAL , PAY TAX AS IF SECTION 43B(F) IS ON THE STATUTE BOOK BUT AT THE SAME TIME IT WOULD BE ENTITLED TO MAKE A CLA IM IN ITS RETURNS. 27 ITANOS.776 & 947/CHNY/2018 IN VIEW OF THE ABOVE, SUBJECT TO THE CONDITIONS IMP OSED BY THE APEX COURT, SUPRA, THEADDITION MADE IS SUSTAINED. 16. THE NEXT ISSUE RAISED BY THE REVENUE IS WITH RE GARD TO DEPRECIATION ON UPS AT 60% INSTEAD OF 15%. SIMILAR ISSUE WAS RAISED BY THE ASSESSEE IN ITS APPEAL NO.776/CHNY/2018 HEREIN ABOVE. FOR THE SAME REASONING, WE UPHOLD THE ORDER OF THE LD. CIT( A) AND REJECT THE GROUND RAISED BY THE REVENUE. 17. THE NEXT ISSUE RAISED BY THE REVENUE IS WITH R EGARD TO DEPRECIATION ON ASSETS TAKEN OVER BY BANK OF TAMILN ADU. WE HEARD THE RIVAL SUBMISSIONS. SINCE THE LDCIT(A) HAS DIRECTED THE AO TO FOLLOW THE DIRECTIONS OF THIS TRIBUNAL DECISION IN THE ASSESSE ES OWN CASE IN ITA NO.1815/CHY/2011 DATED 02.04.2014 WHEREIN, THE ITAT HAD REMITTED THE MATTER BACK TO THE AO TO VERIFY THE SCHEME OF TAKE OVER AND TO DETERMINE WHETHER THE PROVISIONS OF SECTION 2(1B) W ERE APPLICABLE, WE DO NOT FIND ANY ERROR IN THE ORDER OF THE LD.CIT(A) . 18. THE NEXT GROUND RAISED BY THE REVENUE IS WITH R EGARD TO APPLICABILITY OF SECTION 115JB. THE LD. DR SUBMITT ED THAT THIS ISSUE WAS DECIDED IN FAVOUROF THE ASSESSEE BY THE HONBLE KO LKATA HIGH COURT IN 28 ITANOS.776 & 947/CHNY/2018 THE CASE OF UCO BANK (2015) 64 TAXMAN.COM 51. THIS TRIBUNAL ALSO IN REVENUES APPEAL IN ITA NO.35/MDS/2014 DATED 3.4.20 17 HAS DECIDED THIS ISSUE AGAINST THE REVENUE. THE RELEVANT PORTIO N OF THE ORDER OF TRIBUNAL IS EXTRACTED AS UNDER:- 30. THE LAST GROUND IS WITH REGARD TO APPLICABILIT Y OF THE PROVISIONS OFSECTION 115JB OF THE ACT. 30.1 WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ONRECORD. THE SAME ISSUE CAME FOR CONSIDERATION BEF ORE THIS TRIBUNAL INITA NO.2031/MDS./2013 FOR ASSESSMENT YEAR 2010-11 (SUPRA) WHEREIN HELD THAT:- 95 THE LAST ISSUE IN THE GROUNDS OF APPEAL OF THE REVENUEIS THAT COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN HOLDI NG THAT PROVISIONS OF SECTION 115JB ARE NOT APPLICABLE TO THE ASSESSEE . AT THE TIME OF HEARING, COUNSEL FOR THE ASSESSEE SUBMITS THAT THIS ISSUE HAS BEEN DECIDED BY THE CO-ORDINATE BENCH IN ASSESSEES OWN C ASE IN ITS FAVOUR IN ITA NO I757/MDS/201I DATED 2.4.2013 FOR THE ASSE SSMENT YEAR 2006- 07. COPY OF THE ORDER IS PLACED ON RECORD. DEPARTME NTAL REPRESENTATIVE SUPPORTS THE ORDER OF THE ASSESSING OFFICER IN COMP UTING THE BOOK PROFITS UNDER SECTION 1 15JB OF THE ACT. 96. WE HAVE PERUSED THE ORDERS OF LOWER AUTHORITIES AND FIND THAT THE ASSESSING OFFICER COMPUTED BOOK PROFITS UNDER SECTI ON 1I5JB OF THE ACT AND ALSO INCOME UNDER NORMAL PROVISIONS OF THE ACT AS THE INCOME UNDER NORMAL PROVISIONS OF THE ACT IS MORE HE ADOPT ED THE SAID INCOME. THE ASSESSEE ALSO CHALLENGED AGAINST THE ACTION OF THE ASSESSING OFFICER IN COMPUTING BOOK PROFITS UNDER SECTION II5 JB CONTENDING THAT PROVISIONS HAVE NO APPLICATION TO ITS BANK HAVING G ONE THROUGH THE DECISION OF THE CO-ORDINATE BENCH IN ASSESSEES OWN CASE IN ITA NO. 1757/MDS/20LI DATED 2.4.2013, WE FIND THAT THE ISSU E HAS BEEN DECIDED IN FAVOUR OF THE ASSESSE. RESPECTFULLY FOLLOWING TH E SAID DECISION, WE UPHOLD THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) AND REJECT THE GROUNDS RAISED BY THE REVENUE ON THIS IS SUE. RESPECTFULLY FOLLOWING THE SAID DECISION, WE REJECT THE GROUND OF APPEAL OF THE REVENUE ON THIS ISSUE. THOUGH WE HAVE TO FOLLOW THE ABOVE DECISIONS, WE FIND FROM THE ORDER OF THE LD.CIT(A) THAT HE HAS NOT ADJUDICATED THIS ISSUE FOR THE REASON THAT AO HAS NOT COMPUTED THE BOOK PROFIT IN THE AS SESSMENT ORDER FOR 29 ITANOS.776 & 947/CHNY/2018 THE REASON THAT SINCE THE TAX PAYABLE UNDER NORMAL METHOD WAS MORE THAN THE TAX PAYABLE UNDER SECTION 115JB. THEREFORE , THIS ISSUE BEING ACADEMIC, TREATED AS AN INFRUCTUOUS ONE AND DISMIS SED. 19. IN THE RESULT , THE REVENUES APPEAL IS PARTLY ALLOWED. 20. TO SUM UP, THE ASSESSEES APPEAL AS WELL AS THE REVENUES ARE PARTLY ALLOWED. ORDER PRONOUNCEDON 28 TH FEBRUARY, 2019 AT CHENNAI. SD/- SD/- ( . . . ) ( . ) (N.R.S.GANESAN) (S.JAYARAMAN) ( / JUDICIAL MEMBER) ( / ACCOUNTANT MEMBER) /CHENNAI, # /DATED 28 TH FEBRUARY, 2019 SOMU '( )( /COPY TO: 1. APPELLANT 2. RESPONDENT 3. * ( ) /CIT(A) 4. * /CIT 5. ( . /DR 6. 1 /GF